New-home sales fall 0.8% in June

WASHINGTON — New-home sales edged down 0.8 percent in June after soaring to a record sales pace in May, the government reported Tuesday, though the drop was less than expected.

The Commerce Department said sales of new single-family homes slipped to an annual rate of 1.326 million units, the second-highest level on record, after hitting a record pace of 1.337 million in May. Economists had expected sales to tumble to a rate of 1.272 million.

The average rate on a 30-year fixed mortgage rose in June to the highest level in almost two years, as Federal Reserve policymakers began boosting interest rates.

"The upward turn in interest rates is dragging `fence-sitters' into the housing market," said John Ryding, chief U.S. economist at Bear Stearns & Co. in New York. "U.S. households are displaying tremendous confidence in future economic conditions by their willingness to enter into the housing market."

Economists said that housing, one of the star performers of this recovery, still has a tremendous amount of momentum, with growth in employment helping to offset the slight uptick in mortgage rates, which are about 1 percentage point higher than they were a year ago.